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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
is determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
51 WEST 52ND STREET, NEW YORK, NEW YORK 10019
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
April __, 2000
To the Stockholders:
A Special Meeting of Stockholders of The Foreign & Colonial Emerging
Middle East Fund, Inc. (the "Fund") will be held at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York on the 30th floor,
on Monday, June 12, 2000, at 11:00 a.m., for the purposes of considering and
voting upon:
1. Approval of a Plan of Liquidation and Dissolution of the Fund.
2. Any other business that may properly come before the meeting.
The close of business on May 1, 2000 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting.
The Board of Directors of the Fund has determined that it is advisable
and in the best interests of the Fund's stockholders to recommend the
liquidation and dissolution of the Fund. At its December 1998 meeting, the Board
adopted a resolution providing that if the average weekly discount of the Fund's
shares for the fiscal year ending October 31, 2000 were equal to or greater than
15%, the Board expected that it would submit to stockholders a proposal to
liquidate the Fund at the following annual meeting of stockholders, absent
unusual market or other conditions existing at that time. As a result of the
continued discount to net asset value at which the Fund's shares trade and the
approval by more than 91% of a stockholder resolution calling for the Board to
allow stockholders to realize net asset value for their shares as soon as
practicable, the Board has re-examined the premises of its 1998 resolution on
the issue of the Fund's discount and decided to accelerate the time frame for
allowing stockholders to realize net asset value. To this end the Board has
determined that it is advisable and in the best interests of the Fund's
stockholders to recommend the liquidation and dissolution of the Fund. Although
the Board of Directors believes that the Fund's long-term performance has been
positive and that the Fund's investment adviser, Foreign & Colonial Emerging
Markets Limited ("FCEM"), continues to have the capacity to effectively manage
Middle Eastern investment portfolios, the Board has determined that it is
advisable to liquidate the Fund in order to allow stockholders to realize net
asset value for their shares as soon as practicable. Accordingly, if
stockholders vote to approve the Plan of Liquidation and Dissolution, as soon as
practicable after that vote the Fund's portfolio will be liquidated, its affairs
will be wound up, and the liquidation proceeds will be distributed pro rata to
stockholders. Due to the inherent relative illiquidity of the securities in the
Fund's portfolio and the markets in which the Fund invests, the distributions to
stockholders of their liquidation proceeds will occur in at least two or more
stages.
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The Board of Directors believes that the proposal set forth in the
Notice of Meeting for the Fund is important and recommends that you read the
enclosed materials carefully and then vote for the proposal. The stockholders
present at the Special Meeting will have an opportunity to ask questions about
the Plan of Liquidation and Dissolution.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN
YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not
receive your executed proxy card(s), you may receive a telephone call from our
proxy solicitor, Innisfree M&A Incorporated, reminding you to vote.
Respectfully,
Karen J. Clarke
President and Secretary
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IMPORTANT: TO AVOID UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
COMPLETE THE ENCLOSED PROXY CARD, DATE AND SIGN IT AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED, REGARDLESS OF HOW LARGE OR HOW SMALL YOUR HOLDINGS MAY BE. IF
YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE IN VOTING YOUR SHARES, PLEASE
CALL THE FIRM ASSISTING US IN SOLICITING PROXIES, INNISFREE M & A INCORPORATED,
TOLL FREE AT 1-888-750-5834.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and avoid the time and expense to the Fund involved in validating your vote if
you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION
CORPORATE ACCOUNTS VALID SIGNATURE
(1) ABC Corp. ..................................ABC Corp.
(2) ABC Corp. ..................................John Doe, Treasurer
(3) ABC Corp. ..................................John Doe
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan...............John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust...................................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee........................Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. .......................John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith...............................John B. Smith, Jr.,
Executor
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THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
51 WEST 52ND STREET, NEW YORK, NEW YORK 10019
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PROXY STATEMENT
This Proxy Statement is furnished in connection with a solicitation by
the Board of Directors of The Foreign & Colonial Emerging Middle East Fund, Inc.
(the "Fund") of proxies to be used at the Special Meeting of Stockholders of the
Fund (the "Special Meeting") to be held at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York on the 30th floor, on Monday,
June 12, 2000 at 11:00 a.m. (and at any adjournment or adjournments thereof) for
the purposes set forth in the accompanying Notice of Special Meeting of
Stockholders. This proxy statement and the accompanying form of proxy are first
being mailed to stockholders on or about April ____, 2000. Stockholders who
execute proxies retain the right to revoke them in person at the Special Meeting
or by written notice received by the Secretary of the Fund at any time before
they are voted. Unrevoked proxies will be voted in accordance with the
specifications thereon and, unless specified to the contrary, will be voted FOR
Proposal 1. The close of business on May 1, 2000 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Special Meeting. Each stockholder is entitled to one vote for each full
share and an appropriate fraction of a vote for each fractional share held. On
the record date there were 2,807,169 shares of Common Stock outstanding.
In the event that a quorum is not present at the Special Meeting, or in
the event that a quorum is present but sufficient votes to approve or reject the
proposal are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to a date not more than 120 days after the
original record date to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
represented at the Special Meeting in person or by proxy. The persons named as
proxies will vote those proxies which they are entitled to vote FOR or AGAINST
any such proposal in their discretion. A stockholder vote may be taken on the
proposal in this proxy statement prior to any such adjournment if sufficient
votes have been received for approval or rejection. Under the By-Laws of the
Fund, a quorum is constituted by the presence in person or by proxy of the
holders of record of at least a majority of the outstanding shares of Common
Stock of the Fund entitled to vote at the Special Meeting.
Approval of Proposal 1 requires the affirmative vote of a majority of
the Fund's outstanding shares of capital stock, because abstentions and Broker
Non-Votes do not count as votes cast with respect to the Proposal. The effect of
abstentions and Broker Non-Votes is the same as a vote against Proposal 1.
"Broker Non-Votes" refers to proxies received by the Fund which are returned on
behalf of shares held in the name of a broker or nominee, but which are not
voted with respect to the Proposal because the broker or nominee has not
received voting instructions from the beneficial owners or persons entitled to
vote and the broker or nominee does not have discretionary voting power.
Foreign & Colonial Emerging Markets Limited ("FCEM"), whose principal
business address is Exchange House, Primrose Street, London, England EC2A 2NY,
is the Fund's investment adviser. Mitchell Hutchins Asset Management Inc., whose
principal business address is 51 West 52nd Street, New York, New York 10019, is
the Fund's administrator.
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The Fund will furnish, without charge, a copy of the Fund's most recent
Annual Report to any stockholder upon request. A stockholder who wishes to
request a copy of the report may do so by calling Innisfree M & A Incorporated
toll free at 1-888-750-5834.
[rest of this page intentionally left blank]
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PROPOSAL 1:
APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION
The Fund proposes to liquidate its assets and dissolve pursuant to the
provisions of the Plan of Liquidation and Dissolution of the Fund (the "Plan")
as recommended and declared advisable by the Board of Directors at a meeting
held on March 27, 2000. The Board has determined that the orderly liquidation of
the Fund's assets is advisable and has directed that the Plan be submitted for
consideration by the stockholders of the Fund. The Plan provides for the
complete liquidation of all of the assets of the Fund, the payment by the Fund
of all known obligations, including the expenses of the liquidation, and the
receipt by stockholders of one or more distributions equal to their pro rata
portion of the net assets of the Fund, together with accrued and unpaid
dividends and distributions. If the Plan is approved by the Fund's stockholders,
FCEM will cease to manage the Fund's assets in accordance with the Fund's
investment objective and policies and instead will undertake to liquidate the
Fund's assets on such terms and conditions as FCEM shall determine to be
reasonable and in the best interests of the Fund and its stockholders. It is
anticipated that it will take an extended period of time to sell the Fund's
portfolio securities and distribute the resulting cash, less expenses of
liquidation, to stockholders. A copy of the Plan is attached to this Proxy
Statement as Exhibit A, and the description of the Plan in this Proxy Statement
is qualified in its entirety by reference to Exhibit A.
In the event the Plan is not approved by the requisite stockholder
vote, the Board of Directors will consider what other action, if any, should be
taken.
I. BACKGROUND
The Board of Directors has, over the past several years, discussed the
significance of the existence of the discount to net asset value at which the
Fund's shares have traded on the New York Stock Exchange and the impact on
stockholders of the discount. The Board has discussed and considered various
alternative strategies to address the discount, including instituting share
repurchases, tender offers, converting to an open-end format (including merging
with an open-end fund), adopting an interval fund format, or liquidation.
In particular, the Board reviewed and considered the full range of
alternatives available to the Fund in depth during discussions of the discount
issue at meetings of the Board of Directors held in May and October 1997, April,
July, October and December 1998, January and October 1999, and at two meetings
in March 2000. At the above-mentioned meetings, the Board of Directors conducted
a thorough examination of issues related to the Fund's discount. Following an
intensive study, at its December 8, 1998 meeting, the Board unanimously adopted
a resolution that if the average weekly discount of the Fund's shares for the
fiscal year ending October 31, 2000 were equal to or greater than 15%, the Board
expected that it would submit to stockholders a proposal to liquidate the Fund
at the following annual meeting of stockholders, absent unusual market or other
conditions existing at that time.
The Board's decision at the time of its December 1998 resolution was
based on the Fund's historically positive performance and FCEM's belief that
Middle East issuers would continue to provide long-term growth opportunities.
The Board considered that liquidation would terminate the opportunity for the
Fund's stockholders to have a diverse investment in a region of relatively
illiquid markets. In addition, the
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Board considered the need to balance the long-term nature of an investment in
the Fund (and the relatively illiquid markets in which the Fund invests) against
the interests of stockholders in realizing close to the full value of their
shares at some point.
The Board subsequently maintained that the end of the Fund's fiscal
year 2000 was the most appropriate and practical time to recommend whether or
not to liquidate the Fund, taking into consideration (a) the relative
illiquidity in the emerging markets in which the Fund invests; (b) the concern
of investors about potential problems in emerging markets as a result of the
Year 2000 ("Y2K") computer problem that could explain the reluctance of
investors to invest in the securities of Middle Eastern issuers; and (c) the
state of the peace process in the Middle East, which in FCEM's view was
encouraging.
At the time the Board made this decision, it considered the full range
of alternatives available for dealing with the discount -- including, as
discussed, share repurchase programs, tender offers and open-ending the Fund.
With respect to open-ending, the Board concluded that such action was not
advisable and not in the best interests of stockholders for several reasons. The
Board determined that it would face substantial difficulties were it to try to
open-end the Fund because of the Fund's size and the relative illiquidity of the
markets in which the Fund invests. Because an open-end fund must redeem shares
upon demand, the Fund might be forced to execute sales of its portfolio
securities to meet redemptions, even if the relative illiquidity of the markets
in which those securities trade rendered such forced sales disadvantageous to
the Fund's other stockholders. In order to satisfy redemptions, the Fund would
also have to hold a portion of its assets in cash -- a need which would inhibit
the Fund from fully investing its assets in accordance with its investment
program. Redemptions of shares by stockholders also would impose potentially
adverse tax consequences on the non-redeeming stockholders, who would receive a
taxable distribution reflecting the sizable gain realized upon the sale of the
securities sold to meet redemptions. The Board also considered the fact that it
would be difficult to find a distributor that could sell new shares of the Fund
in quantities sufficient to offset the redemptions. Therefore, the Board
concluded that converting the Fund to an open-end fund would likely result in a
small fund that would not have a competitive expense ratio. As a result of these
considerations, the Board believed that the closed-end structure remained the
most effective vehicle for investing in highly volatile and relatively illiquid
emerging markets. In FCEM's view there have been many attractive equity
investment opportunities in the Middle East, and many continue to exist.
Based on a study of share repurchase programs and tender offers
conducted by other similar closed-end investment companies, the Board further
concluded that these actions were unlikely to have anything other than a short
term effect on the Fund's discount. The Board also noted that share repurchase
programs and tender offers could also have a potentially negative effect on the
Fund's expense ratio. This is because a share repurchase program or tender offer
would reduce the asset size of the Fund, while simultaneously increasing each
stockholder's proportionate burden of the Fund's fixed expenses, such as legal
and accounting costs.
II. REASONS FOR THE LIQUIDATION AND DISSOLUTION
Despite the Board's action on the issue of the Fund's discount to net
asset value -- chiefly its December 1998 resolution -- stockholders of the Fund
continued to express their dissatisfaction with the size of the Fund's discount.
Stockholders also disagreed with the time-frame established by the Board as the
most appropriate for taking action to allow stockholders to realize net asset
value. In that regard, a stockholder of the Fund proposed that the Board adopt a
resolution to allow stockholders to realize net asset value for their shares of
the Fund. This proposal, which was submitted for consideration at the March 6,
2000 Annual
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Meeting of Stockholders, passed with more than 91% of the stockholder vote. A
chief premise of this proposal, enunciated in the proponents's supporting
statement, was disagreement with the Board's determination of when the earliest
practicable time would be for allowing stockholders to realize net asset value.
The stockholder proposal specified in its supporting statement that stockholders
should not be forced to wait until October 2000 for a determination of whether
or not the Board should recommend liquidation, as the Board's own resolution
provided; instead, the stockholder proposal urged the Board to act "sooner" than
October, by redeeming shares at net asset value, liquidating, or open-ending the
Fund.
Following the passage of the stockholder proposal by a vote of a very
substantial percentage of the outstanding common stock, and as part of the
Board's ongoing analysis of the Fund's discount, the Board undertook a
reexamination of the premises on which it based its December 1998 resolution
regarding liquidation. As part of this reconsideration, the Board reexamined the
effect of the passage of Y2K, the current status of the Middle East peace
process, and the current market outlook for the Middle East. The Board also
reviewed the feasibility of alternatives for allowing stockholders to realize
net asset value. To assist the Directors in making a fully-informed analysis,
the Board asked the Fund's counsel, administrator and investment adviser to
prepare reports on these issues.
In its reexamination, the Board reviewed the effect of the passage of
Y2K on the Fund. FCEM reported to the Board that although the Middle East
survived the passage of the Y2K roll-over without major disruption to its
computer infrastructure, the Middle Eastern equities markets did not experience,
as some observers had anticipated, an influx of capital after the safe passage
of Y2K. FCEM further informed the Board that there no longer existed any basis
to delay allowing stockholders to receive their pro rata portion of the net
assets of the Fund on the belief that the Fund's discount would be alleviated by
a return of capital to the Middle Eastern equities markets as a result of the
safe passage of Y2K.
The Board also reviewed the status of the Middle East peace process.
FCEM reported to the Board that despite the election of Ehud Barak as Prime
Minister in Israel and the subsequent Israeli withdrawal from southern Lebanon,
the prospects for multilateral peace agreements remain, in FCEM's view,
uncertain. Given the historic intractability of the Middle East peace process
and recent failures to move the process forward (particularly, for example, with
regard to attempts to reach accords between Israel and Syria), the Board
concluded that there existed no compelling reason to delay allowing stockholders
to receive their pro rata portion of the net assets of the Fund on the basis of
the status of the Middle East peace process.
In addition, the Board considered the general market outlook for the
Middle East region. Noting that the Fund's recent performance has been positive,
FCEM informed the Board that it expected the positive performance of the Middle
East equities markets to continue in 2000. However, no assurance can be given in
this regard. Finally, FCEM stated that it did not think that the Fund's discount
was likely to decrease significantly in the near future.
In light of these factors and the strong message from stockholders, the
Board concluded that it should reconsider its decision regarding the timing of
any action to allow stockholders to receive their pro rata portion of the net
assets of the Fund. Accordingly, the Board undertook a renewed analysis of the
alternatives available to the Fund for allowing stockholders to realize their
pro rata portion of the net assets of the Fund. The Board again considered the
following alternatives: share repurchases, redemptions, tender offers,
converting to an open-end format, or liquidating. The Board discussed each of
these alternatives at length and analyzed the relative merits of each. As it had
previously concluded, the Board reaffirmed that each of
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the alternatives other than liquidation was either not feasible or unlikely to
substantially close the discount to net asset value for a sustained period of
time.
Based upon the foregoing considerations and other relevant factors, and
despite the Fund's long-term performance record and the Board's belief that the
Fund has offered stockholders a significant opportunity to participate in the
Middle East equity markets, the Board at a meeting held on March 27, 2000
concluded that the liquidation and subsequent dissolution of the Fund was
advisable and in the best interests of the Fund's stockholders at the present
time.
The Board, including a majority of the Directors who are not
"interested persons" of the Fund (as that term is defined in the Investment
Company Act of 1940, as amended ("the 1940 Act")), then adopted resolutions
approving the Plan, declaring the proposed liquidation and dissolution pursuant
to the provisions of the Plan advisable and directing that the Plan be submitted
to the stockholders of the Fund for their consideration. In connection with the
proposal, the Fund will bear the costs associated with the liquidation of the
Fund, which are expected to total approximately $[100,000].
As of April ___, 2000, the net asset value per share of the Fund's
shares was $_____, whereas the price of the last reported trade of the Fund's
shares on the same date was $_____. The market price of the Fund's shares and
the value of its assets may increase or decrease prior to the distribution of
the assets to the Fund's stockholders. Stockholders are urged to obtain current
market quotations for the Fund's shares.
III. SUMMARY OF PLAN OF LIQUIDATION AND DISSOLUTION OF THE FUND
The following summary does not purport to be complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Plan which is attached hereto as Exhibit A. Stockholders are urged to
read the Plan in its entirety.
The Plan will become effective only upon its adoption and approval by
the holders of a majority of the outstanding shares of the Fund (the "Effective
Date"). The Plan provides for the complete liquidation of the assets of the
Fund, distribution of the proceeds to stockholders and dissolution of the Fund.
If the Plan is approved, FCEM will undertake to liquidate the Fund's assets on
such terms and conditions as FCEM, under the supervision of the Board, shall
determine to be reasonable and in the best interests of the Fund and its
stockholders. All expenses incurred by the Fund in carrying out the Plan will be
borne by the Fund and, indirectly, the stockholders of the Fund.
The Plan provides that the Board of Directors has the authority to make
such non-material variations from or non-material amendments to the provisions
of the Plan (other than the terms of the liquidating distributions) at any time
without stockholder approval, if the Board of Directors determines that such
action would be advisable and in the best interests of stockholders, as may be
necessary or appropriate to effect the marshalling of Fund assets and the
dissolution, complete liquidation and termination of existence of the Fund, and
the distribution of its net assets to stockholders in accordance with the laws
of the State of Maryland and the purposes of the Plan. In addition, the Plan
authorizes the Board to abandon the Plan without stockholder approval at any
time prior to the filing of Articles of Dissolution with the State Department of
Assessments and Taxation of Maryland if the Board determines that such
abandonment would be advisable and in the best interests of the Fund's
stockholders.
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IV. CLOSING OF BOOKS AND RESTRICTION ON TRANSFER OF SHARES
After the Effective Date, the Board will set a distribution record date
on which the books of the Fund will be closed and the proportionate interests of
stockholders in the assets of the Fund will be fixed on the basis of their
holdings. Stockholders holding Fund shares as of the close of business on the
distribution record date will receive their proportionate share of all
liquidation distributions, as defined below, without any further action on their
part. Thereafter, unless the books of the Fund are reopened because the Plan
cannot be carried into effect under the laws of the State of Maryland or
otherwise, the stockholders' respective interests in the Fund's assets will not
be transferable by the negotiation of share certificates and the Fund's shares
will cease to be traded on the New York Stock Exchange.
V. LIQUIDATION VALUE
If the Plan is adopted by the Fund's stockholders at the Special
Meeting, as soon as practicable after the consummation of the sale of the Fund's
portfolio securities and the payment of all of the Fund's known expenses,
charges, liabilities and other obligations, including those expenses incurred in
connection with the liquidation, each Fund stockholder will receive one or more
liquidation distributions in an amount equal to the stockholder's proportionate
interest in the Fund, as determined in accordance with the Fund's current
valuation procedures, together with accrued and unpaid dividends and
distributions with respect to each of the stockholder's shares of the Fund (each
such distribution, a "Liquidation Distribution"). The amount of each
distribution will vary. Due to the relatively illiquid nature of the Fund's
investment portfolio and the estimated time it will take to liquidate certain of
the relatively more illiquid positions, it is expected that there will be at
least two Liquidation Distributions over an extended period of time. FCEM will
seek to sell the Fund's portfolio at prevailing market prices, consistent with
an orderly liquidation and taking into account the relatively illiquid nature of
the Fund's holdings and the best interests of the Fund and its stockholders in
light of the circumstances in which the sales occur. No assurances can be given,
however, that FCEM will be able to sell the Fund's securities at prevailing
market prices. In addition to potentially adverse market conditions, FCEM's
ability to sell the Fund's securities at prevailing market prices may also be
negatively impacted by the relatively small size of the Fund's positions in its
portfolio securities as well as the general awareness in the marketplace of the
Fund's need to liquidate the portfolio.
VI. LIQUIDATION DISTRIBUTION
Due to the inherent relative illiquidity of the securities in the
Fund's portfolio and the markets in which Fund invests, the Liquidation
Distributions will occur in at least two or more stages on two or more different
dates (each such date, a "Liquidation Date"). At present, the dates on which the
Fund will be liquidated and on which the Fund will pay Liquidation Distributions
to its stockholders are uncertain, but it is anticipated that if the Plan is
adopted by the stockholders the first such Liquidation Distribution, which will
represent a substantial portion of the Fund's portfolio, would be paid
approximately three months after stockholders approve the Plan, that the second
such Liquidation Distribution would occur approximately nine months after
stockholders approve the Plan, and that the remaining portion of the portfolio
will be liquidated and a final Liquidation Distribution paid at such time as the
liquidation of the portfolio is completed. There can be no assurance, however,
that the Liquidation Distributions will occur within these time-frames.
A stockholder holding shares of the Fund in certificated form
("Certificate Stockholders") will receive one or more Liquidation Distributions
upon receipt by the Fund of the stockholder's certificates.
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Certificate Stockholders will receive appropriate instructions for submission of
their certificates prior to each Liquidation Date.
VII. FEDERAL INCOME TAX CONSEQUENCES
The following summary provides general information with regard to the
federal income tax consequences to stockholders on receipt of a Liquidation
Distribution from the Fund pursuant to the provisions of the Plan. This summary
also discusses the effect of federal income tax provisions on the Fund resulting
from its liquidation and dissolution; however, the Fund has not sought a ruling
from the Internal Revenue Service (the "Service") with respect to the
liquidation and dissolution of the Fund. The statements below are, therefore,
not binding upon the Service, and there can be no assurance that the Service
will concur with this summary or that the tax consequences to any stockholder
upon receipt of a Liquidation Distribution will be as set forth below.
This summary is based on the tax laws and regulations in effect on the
date of this Proxy Statement, all of which are subject to change by legislative
or administrative action, possibly with retroactive effect.
The information below is only a summary of some of the federal tax
consequences generally affecting the Fund and its individual U.S. stockholders
resulting from the liquidation of the Fund. This summary does not address the
particular federal income tax consequences applicable to stockholders other than
U.S. individuals nor does it address state or local tax consequences. The tax
consequences discussed herein may affect stockholders differently depending on
their particular tax situations unrelated to a Liquidation Distribution, and
accordingly, this summary is not a substitute for careful tax planning on an
individual basis. Stockholders are encouraged to consult their personal tax
advisers concerning their particular tax situations and the impact thereon on
receiving a Liquidation Distribution. The receipt of a Liquidation Distribution
may result in tax consequences that are unanticipated by stockholders.
As discussed above, pursuant to the Plan, the Fund will sell its
assets, pay or make provisions for the payment of all liabilities, distribute
the remaining proceeds to its stockholders and dissolve. The Fund anticipates
that the Fund will retain its qualification as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), during the
liquidation period and, therefore, will not be taxed on any of its net capital
gains realized from the sale of its assets.
For federal income tax purposes, a stockholder's receipt of a
Liquidation Distribution will be a taxable event and will be treated as a sale
of the stockholder's shares of the Fund in exchange for a Liquidation
Distribution. Each stockholder will recognize a gain or loss in an amount equal
to the difference between the adjusted tax basis in his or her shares and a
Liquidation Distribution he or she receives from the Fund. If the shares are
held as a capital asset, the gain or loss will generally be characterized as a
capital gain or loss. If the shares have been held for more than one year, any
gain will constitute a long-term capital gain taxable to individual stockholders
at a maximum rate of 20%, and any loss will constitute a long-term capital loss.
If at the time of receiving a Liquidation Distribution, the stockholder has held
the shares for not more
8
<PAGE>
than one year, any gain or loss will generally be a short-term capital gain or
loss. If, however, the stockholder has held the shares for six months or less
and has received capital gains dividends with respect to the shares, any loss
realized will be a long-term capital loss to the extent of such capital gains
dividend.
If a stockholder has failed to furnish a correct taxpayer
identification number or has failed to certify that he or she has provided a
correct taxpayer identification number and that he or she is not subject to
"backup withholding," the stockholder may be subject to a 31% backup withholding
tax with respect to any ordinary or capital gains dividends. Moreover, a failure
to furnish a correct taxpayer identification number may result in a 31% backup
withholding tax with respect to the Liquidation Distribution. An individual's
taxpayer identification number is his or her social security number. The backup
withholding tax is not an additional tax and may be credited against a
taxpayer's federal income tax liability.
Stockholders will be notified of their respective shares of ordinary and
capital gains dividends for the Fund's final fiscal year in normal tax-reporting
fashion.
VIII. IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE 1940 ACT
On the Effective Date, the Fund will cease doing business as a
registered investment company and, as soon as practicable thereafter, will apply
for de-registration under the 1940 Act. It is expected that the Securities and
Exchange Commission will issue an order approving the de-registration of the
Fund if the Fund is no longer doing business as an investment company.
Accordingly, the Plan provides for the eventual cessation of the Fund's
activities as an investment company and its de-registration under the 1940 Act,
and a vote in favor of the Plan will constitute a vote in favor of such a course
of action.
IX. PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW
After the Effective Date, pursuant to the Maryland General Corporation
Law and the Fund's Charter and By-Laws, as amended, Articles of Dissolution
stating that the dissolution has been authorized will in due course be executed,
acknowledged and filed with the Maryland State Department of Assessments and
Taxation, and will become effective in accordance with such law. When the
Articles of Dissolution become effective, the Fund will be legally dissolved,
but thereafter the Fund will continue to exist for the purposes of paying,
satisfying and discharging any existing debts or obligations, collecting and
distributing its assets, and doing all other acts required to liquidate and wind
up its business and affairs, but not for the purpose of continuing the business
for which the Fund was organized. The Fund's directors will be the trustees of
its assets for purposes of liquidation after the acceptance of the Articles of
Dissolution, unless and until a court appoints a receiver. The director-trustees
will be vested in their capacity as trustees with full title to all the assets
of the Fund.
X. APPRAISAL RIGHTS
Stockholders will not be entitled to appraisal rights under Maryland
law in connection with the Plan.
9
<PAGE>
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of a majority of
the Fund's outstanding shares of common stock as of the record date. The Board
recommends that the stockholders vote FOR the proposed liquidation and
dissolution of the Fund pursuant to the provisions of the Plan of Liquidation
and Dissolution. The effect of abstentions and Broker Non-Votes is the same as a
vote against the Proposal.
PROPOSAL 2:
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Fund is not aware of any matters that
will be presented for action at the Special Meeting other than the matters set
forth herein. Should any other matters requiring a vote of stockholders arise,
the proxy in the accompanying form will confer upon the person or persons
entitled to vote the shares represented by such proxy the discretionary
authority to vote the shares as to any such other matters in accordance with
their best judgment in the interests of the Fund.
----------------
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of April 10, 2000, the Directors and officers of the Fund, as a
group, beneficially owned less than 1% of the outstanding shares of the Fund.
The following table sets forth the beneficial ownership of shares of
the Fund, at April 10, 2000 by each person known to the Fund to be deemed to be
the beneficial owner of more than 5% of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES
------------------------ BENEFICIALLY OWNED PERCENT OWNERSHIP
------------------ -----------------
<S> <C> <C>
International Finance Corporation (1)
1818 H Street, N.W.
Washington, D.C. 20433 500,000 17.8 %
Lazard Freres & Co., LLC (2) 716,300 25.51 %
30 Rockefeller Plaza
New York, New York 10020
The State Teachers Retirement Board of Ohio (3)
275 East Broad Street
Columbus, Ohio 43215 533,527 19.01 %
</TABLE>
- ----------------
(1) Based solely upon information presented in Schedule 13D, dated November
14, 1994, filed by International Finance Corporation, which has sole
voting and dispositive power as to all such shares.
(2) Based solely upon information presented in Schedule 13G/A, dated April 5,
2000, filed by Lazard Freres & Co. LLC ("Lazard"). Lazard is the
beneficial owner of such shares as a result of acting as an investment
adviser. Lazard has sole voting and dispositive power as to all such
shares.
10
<PAGE>
(3) Based solely upon information presented in Schedule 13G/A, dated January
28, 2000, filed by The State Teachers Retirement Board of Ohio, which has
sole voting and dispositive power as to all such shares.
In addition, at March 31, 2000 Cede & Co., a nominee for participants in
the Depository Trust Company, held of record 2,289,975 shares of the Fund, equal
to 81.5% of the outstanding shares of the Fund.
ADDITIONAL INFORMATION
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by the Fund.
In addition to solicitation by mail, certain officers and representatives of the
Fund, officers and employees of FCEM and certain financial services firms and
their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
Innisfree M&A Incorporated ("Innisfree") has been engaged to assist in the
solicitation of proxies at a fee to be paid by the Fund and estimated at $6,500,
plus disbursements. The material features of the contract between the Fund and
Innisfree are the following. In return for its fee, Innisfree will 1) assist the
Fund in all aspects of contacting stockholders of the Fund; 2) assist in
facilitating stockholder voting, and; 3) assist in explaining the position of
the Fund's Board with respect to the proposal to stockholders of the Fund. As
the Special Meeting date approaches, certain stockholders of the Fund may
receive a telephone call from a representative of Innisfree if their votes have
not yet been received. Authorization to permit Innisfree to execute proxies may
be obtained by telephonic or electronically transmitted instructions from
stockholders of the Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures set forth below. These procedures
have been reasonably designed to ensure that the identity of the stockholder
casting the vote and the voting instructions of the stockholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the Innisfree
representative is required to ask for each stockholder's full name, address,
social security or employer identification number, title (if the stockholder is
authorized to act on behalf of an entity, such as a corporation), and the number
of shares owned and to confirm that the stockholder has received the proxy
statement and card in the mail. If the information solicited agrees with the
information provided to Innisfree, then the Innisfree representative has the
responsibility to explain the process, read the Proposal listed on the proxy
card, and ask for the stockholder's instructions on the Proposal. The Innisfree
representative, although he or she is permitted to answer questions about the
process, is not permitted to recommend to the stockholder how to vote, other
than to read any recommendation set forth in the proxy statement. Innisfree will
record the stockholder's instructions on the card. Within 72 hours, the
stockholder will be sent a letter or mailgram to confirm his or her vote and
asking the stockholder to call Innisfree immediately if his or her instructions
are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Special Meeting, but does
not wish to give his or her proxy by telephone, the stockholder may still submit
the proxy card originally sent with the proxy statement or attend in person.
Should stockholders require additional information regarding the proxy or
replacement proxy cards, they may contact Innisfree toll-free at 1-888-750-5834.
Any proxy given by a stockholder, whether in writing or by telephone, is
revocable until the Special Meeting.
11
<PAGE>
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
Karen J. Clarke
President and Secretary
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION OF THE
FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
The Foreign & Colonial Emerging Middle East Fund, Inc., a Maryland
corporation (the "Fund"), shall proceed to a complete liquidation of the Fund
according to the procedures set forth in this Plan of Liquidation and
Dissolution (the "Plan"). The Board of Directors of the Fund (the "Board") has
declared that the Plan is advisable and in the best interests of the Fund's
stockholders. The Board has directed that this Plan be submitted to the holders
of the outstanding voting shares of the Fund (each a "Stockholder" and,
collectively, the "Stockholders") for their adoption at the Special Meeting of
Stockholders and has authorized the distribution of a Proxy Statement (the
"Proxy Statement") in connection with the solicitation of proxies for such
meeting. Upon Stockholder approval of the Plan, the Fund shall completely
liquidate and dissolve in accordance with the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), the Maryland General
Corporation Law (the "MGCL") and the Internal Revenue Code of 1986, as amended
(the "Code"), as follows:
1. Adoption of Plan. The effective date of the Plan (the "Effective
Date") shall be the date on which the Plan is adopted by the Stockholders.
2. Cessation of Business. After the Effective Date of the Plan, the
Fund shall cease its business as an investment company and shall not engage in
any business activities except for the purpose of paying, satisfying and
discharging any existing debts and obligations, collecting and distributing its
assets, and doing all other acts required to liquidate and wind up its business
and affairs in accordance with the Plan.
3. Restriction of Transfer and Redemption of Shares. After the
Effective Date, the Board will set a distribution record date on which the books
of the Fund shall be closed and the proportionate interests of stockholders in
the assets of the Fund shall be fixed on the basis of their respective holdings.
Thereafter, unless the books of the Fund are reopened because the Plan cannot be
carried into effect under the laws of the State of Maryland or otherwise, the
stockholders' respective interests in the Fund's assets shall not be
transferable by the negotiation of share certificates and the Fund's shares will
cease to be traded on the New York Stock Exchange.
A-1
<PAGE>
4. Liquidation and Distribution of Assets. As soon as practicable after
the Effective Date, the Fund and the Fund's investment adviser, Foreign &
Colonial Emerging Markets Limited ("FCEM"), under the supervision of the Board,
shall have the authority to engage in such transactions as may be appropriate
for the Fund's liquidation and dissolution, including, without limitation, the
consummation of the transactions described in the Proxy Statement. FCEM will
seek to sell the Fund's portfolio at prevailing market prices, consistent with
an orderly liquidation and taking into account the relatively illiquid nature of
the Fund's holdings. No assurances can be given, however, that FCEM will be able
to sell the Fund's securities at prevailing market prices. At present, the dates
on which the Fund will be liquidated and on which the Fund will pay liquidation
distributions (each such distribution, a "Liquidation Distribution") to its
stockholders are uncertain, but it is anticipated that if the Plan is adopted by
the stockholders at the Special Meeting on June 12, 2000 the first such
Liquidation Distribution would be paid approximately three months after
stockholders approve the Plan, that the second such Liquidation Distribution
would occur approximately nine months after stockholders approve the Plan, and
that the remaining portion of the portfolio will be liquidated and a final
Liquidation Distribution paid at such time as the liquidation of the portfolio
is completed.
5. Provisions for Liabilities. The Fund shall pay or discharge or set
aside a reserve fund for, or otherwise provide for the payment or discharge of,
any liabilities and obligations, including, without limitation, contingent
liabilities.
6. Distribution to Stockholders. As discussed above, distribution will
occur in at least two or more stages on two or more different dates (each such
date a "Liquidation Date"). As soon as practicable after the Effective Date and
in accordance with section 331 of the Code of 1986 and the MGCL the Fund shall
begin to liquidate and distribute pro rata on each Liquidation Date to its
stockholders of record as of the close of business on the date immediately
preceding each Liquidation Date all of the remaining assets of the Fund in
complete cancellation and redemption of all the outstanding shares of the Fund,
except for cash, bank deposits or cash equivalents in an estimated amount
necessary to (i) discharge any unpaid liabilities and obligations of the Fund on
the Fund's books on each Liquidation Date, including, but not limited to, income
dividends and capital gains distributions, if any, payable through each
Liquidation Date, and (ii) pay or provide for the payment of such contingent
liabilities as the Board shall reasonably deem to exist against the assets of
the Fund on the Fund's books. The final liquidation distribution shall be deemed
to include an uncertificated right to the holder's pro rata portion of any
remaining reserves for contingencies; payment shall be made, upon the advice of
counsel and with the approval of the board of directors acting in their capacity
as liquidating trustees, upon the satisfaction of all known liabilities.
7. Notice of Liquidation. As soon as practicable after the Effective
Date, the Fund shall mail notice to the appropriate parties that this Plan has
been approved by the Board and the Stockholders and that the Fund will be
liquidating its assets, to the extent such notice is required under the MGCL.
A-2
<PAGE>
8. Filings. Following the Effective Date, the Fund shall prepare and
file Articles of Dissolution, Form N-8F under the 1940 Act and any other
documents as are necessary to effect the dissolution and/or de-registration of
the Fund and its shares in accordance with the requirements of the Charter of
the Fund, the MGCL, the Code, the 1940 Act and any other applicable securities
laws, and any rules and regulations of the Securities and Exchange Commission or
any state securities commission, including, without limitation, withdrawing any
qualification to conduct business in any state in which the Fund is so
qualified, as well as the preparation and filing of any tax returns, and the
filing of materials with the New York Stock Exchange in order to withdraw the
listing of the Fund.
9. Amendment or Abandonment of Plan. The Board may modify or amend this
Plan at any time without stockholder approval if it determines that such action
would be advisable and in the best interests of the Fund and its Stockholders.
If any amendment or modification appears necessary and in the judgment of the
Board will materially and adversely affect the interests of the Stockholders,
such an amendment or modification will be submitted to the Stockholders for
approval. In addition, the Board may abandon this Plan without Stockholder
approval at any time prior to the filing of the Articles of Dissolution if it
determines that abandonment would be advisable and in the best interests of the
Stockholders.
10. Powers of Board and Officers. The Board and the officers of the
Fund are authorized to approve such changes to the terms of any of the
transactions referred to herein, to interpret any of the provisions of this
Plan, and to make, execute and deliver such other agreements, conveyances,
assignments, transfers, certificates and other documents and take such other
action as the Board and the officers of the Fund deem necessary or desirable in
order to carry out the provisions of this Plan and effect the complete
liquidation and dissolution of the Fund in accordance with the Code and the
MGCL, including, without limitation, filing of a Form N-8F with the Securities
and Exchange Commission, withdrawing any state registrations of the Fund and/or
its shares, withdrawing any qualification to conduct business in any state in
which the Fund is so qualified and the preparation and filing of any tax
returns, and the filing of materials with the New York Stock Exchange. The
Fund's directors shall be the trustees of its assets for purposes of liquidation
after the acceptance of the Articles of Dissolution, unless and until a court
appoints a receiver. The director-trustees will be vested in their capacity as
trustees with full title to all the assets of the Fund. The death, resignation
or other disability of any director or any officer of the Fund shall not impair
the authority of the surviving or remaining directors or officers to exercise
any of the power provided for in the Plan.
11. Termination of Business Operations. As soon as practicable upon
adoption of this Plan, the Fund shall cease to conduct business except as shall
be necessary in connection with the effectuation of its liquidation and
dissolution.
12. Expenses. The expenses of carrying out the terms of this Plan shall
be borne by the Fund, whether or not the liquidation contemplated by this Plan
is effected.
A-3
<PAGE>
IN WITNESS WHEREOF, the Board of Directors of the Fund has caused this
Plan to be executed by the Fund as of this 27th day of March, 2000.
THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
By:
----------------------
Karen J. Clarke
President and Secretary
A-4
<PAGE>
PROXY PROXY
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S
VOTE WILL BE CAST FOR PROPOSAL 1 LISTED BELOW.
Your Board of Directors recommends that you vote FOR Proposal 1.
1. To approve the liquidation and dissolution of the Fund pursuant to
the provisions of the Plan of Liquidation and Dissolution of the Fund;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Any other business that may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
THE FOREIGN & COLONIAL EMERGING MIDDLE EAST FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- JUNE 12, 2000
The undersigned hereby appoints Fred Arthur Rank Packard, Karen J.
Clarke and Jeffrey Chowdhry, and each of them, attorneys and proxies for the
undersigned, with full power of substitution and revocation, to present the
undersigned at the Special Meeting of Stockholders of The Foreign & Colonial
Emerging Middle East Fund, Inc. to be held at 425 Lexington Avenue, New York,
New York on Monday, June 12, 2000 at ______ a.m., and at any adjournments
thereof, upon the matters set forth in the Notice of Special Meeting and Proxy
Statement dated April _____, 2000 and upon all other matters properly coming
before said meeting.
The proxies are authorized to vote in their discretion on any other
business which may properly come before the meeting and any adjournments
thereof.
Please sign exactly as your name or names appear. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as such.
-----------------------------------
(Signature of Stockholder)
-----------------------------------
(Signature of joint owner, if any)
Dated _______ , 2000
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED.
A-6
